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Major averages close about 1% lower as yields rise ahead of Fed rate decision

Pro Picks: Watch all of Tuesday's big stock calls on CNBC
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Pro Picks: Watch all of Tuesday's big stock calls on CNBC

Stocks tumbled on Tuesday as the sell-off on Wall Street mounted and investors braced for another large rate hike due out Wednesday from the Federal Reserve.

The Dow Jones Industrial Average shed 313.45 points, or 1.01%, to settle at 30,706.23. The S&P 500 slid 1.13% to 3,855.93 and the Nasdaq Composite slumped 0.95% to 11,425.05.

The Federal Open Markets Committee began its two-day policy meeting on Tuesday, where central bankers are expected to announce a 0.75 percentage point rate hike on Wednesday. Stocks have slumped in recent weeks as comments from Fed Chair Jerome Powell and an unexpectedly hot August consumer price index report caused traders to prepare for even higher rates until inflation cools.

Rates marched higher as equities fell, with the yield on the 2-year Treasury note jumped as high as 3.99%, the highest level since 2007. The yield on the 10-year Treasury briefly topped 3.6% — levels not seen since 2011.

The move higher in the 10-year yield likely contributed to the turmoil in equity markets on Tuesday, said Cresset Capital's Jack Ablin.

"Investors have pretty well digested the 75 basis p